PSEi faces GDP, inflation test this week

Local stocks may remain volatile this week as investors await key inflation and economic growth data that could shape the Bangko Sentral ng Pilipinas’ (BSP) next policy move, according to F. Yap Securities Inc.

In its outlook for Aug. 3 to 7, F. Yap said July inflation and second-quarter gross domestic product (GDP) would be among the main catalysts for the market, alongside the ongoing first-half earnings season.

Higher-than-expected inflation could strengthen the case for a possible BSP rate hike, while weaker-than-expected GDP growth could prompt investors to temper their exposure to equities.

“Go defensive by trimming exposure on policy-exposed energy distribution utilities, until implementation guidelines are cleared on the issue of systems losses. Consider switching to banks that benefit from a BSP staying higher-for-longer,” the brokerage said.

The brokerage said investors should watch for momentum around the 6,400 to 6,500 range for stronger rallies.

Rate-path uncertainty abroad could also keep sentiment choppy.

The US Federal Reserve held rates steady for a fifth straight meeting, although F. Yap noted that futures were leaning toward a possible 25-basis-point hike in September as volatile oil prices threaten to keep inflation elevated.

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The brokerage expects yields to remain firm, while the peso could hold up as the BSP matches the Fed’s hawkishness.